Supreme Court Cancels 214 Coal Blocks; Metal Stocks Crash

Shares in companies that have spent crores in developing coal mines crashed on Wednesday after the Supreme Court cancelled all but four coal blocks allocated since 1993. The court let off two coal blocks operated by Reliance Power and one each by state-run NTPC and SAIL as they are associated with Ultra Mega Power Projects (UMPP).

Jindal Steel and Power shares closed 10 per cent lower. Shares in Hindalco Industries, an Aditya Birla Group company, ended 0.50 per cent down. The two stocks had fallen as much as 15 and 5 per cent immediately after the verdict, but saw some recovery.

Most other metal stocks closed lower. Jindal Saw fell 3.3 per cent, while Tata Steel closed down 2.6 per cent. Reliance Power shares closed 5.3 per cent higher though.

Companies that operated coal blocks will have to pay a penalty of Rs 295 per metric tonne for the amount of coal they have extracted from cancelled blocks, the court ruled.

However, in partial relief, the court granted a breathing time of six months so that the operational coal blocks can be taken over by state-run Coal India Limited. The latest ruling will allow the government to come up with a plan to auction the blocks.

Public sector lender IDBI today said it has nearly Rs 2,000 crore exposure to companies affected by the Supreme Court order.

"We are assessing," M.S. Raghavan, chairman and managing director of IDBI Bank, told Reuters after the Supreme Court's verdict.

IDBI Bank shares closed down 5.5 per cent compared to a flat performance in Nifty. The Bank Nifty fell 1 per cent. The broader Nifty closed 15 points or 0.2 per cent lower.

Today's verdict was on expected lines as the top court had declared last month that India's decades-old method of granting coal mining concessions was illegal and arbitrary, but industry lobby Assocham criticised the verdict.

"Our main concern is on the kind of negative impact on the economy which has just been showing signs of recovery after over two years of slowdown," said Rana Kapoor, President of Assocham.

The government's award of more than 200 coal blocks to steel, cement and power companies was at the centre of the "Coalgate" scandal. The Comptroller and Auditor General (CAG) in 2012 said the underpriced sales had cost the exchequer as much as $33 billion.

(With inputs from Reuters)